Israel declared last Thursday that its share of the Aphrodite natural gas reservoir was large enough to be defined as a gas discovery. In response, an official Cypriot source involved in the negotiations between the two countries said, "The timing of this announcement is no accident; it is an attempt to exert pressure on Cyprus to show more flexibility concerning the unitization agreement between the two countries. This is not the right way to start the negotiations, mainly because it is still not clear how much of the gas lies in Israeli territory." An Israeli delegation is slated to visit Cyprus to make progress with the agreement.
The Israel Ministry of National Infrastructure Energy and Water Resources Petroleum Commissioner announced on Thursday that he was classifying the Yishai license as a gas discovery. The word "discovery" means that the reservoir is of commercial value, i.e.; the quantity of gas in it justifies its development. The Yishai license is one of five offshore drilling licenses referred to as "Pelagic licenses," which cover an aggregate area of two million dunam (500,000 acres) west of Haifa. The license is owned by Israel Opportunity Energy Resources LP, Eden Energy Discoveries Ltd. (TASE: EDN), and Benny Steinmetz. It borders the Gal and Ratio-Yam licenses where the Leviathan structure is located, and Noble Energy's Block 12 in Cypriot waters.
Noble Energy, which discovered the gas reservoirs in Israel, also discovered the Cypriot reservoir in a drilling in late 2011. Nobel Energy's initial estimate of the reservoir's capacity was 5-8 TCF of gas. Following verification drillings, however, the results of which were published in October 2013, the quantity of gas was revised to 3.6 TCF (for the sake of comparison, Tamar contains 10 TCF, and Leviathan 20 TCF).
As reported exclusively in "Globes" last month, disputes between Israel and Cyprus over development of the Aphrodite reservoir are delaying the signing of a unitization agreement between the two countries, an agreement that was to have arranged the development of the two countries' joint oil and gas reservoirs and additional energy cooperation. Some of the Aphrodite reservoir extends into the area of the Yishai license on the Israeli side. The unitization agreement had been scheduled for signing together with the marine border agreement signed by Israel and Cyprus in December 2010, but the signing has since been delayed due to disputes in principle and various technical matters. The main reason for the delay in signing the unitization agreement, as sources involved in the negotiations told "Globes," is a dispute over the quantity of gas in Israeli territory and Israel's level of involvement in the reservoir's development. While sources in Cyprus assert that only 1% of Aphrodite is in Israeli territory, Israel says that the number is much larger, and wants to be part of the development plan for the reservoir. Negotiations between the parties have been going on for over five years.
"There is no doubt that Israel's classifying the Yishai license as a gas discovery is an aggressive step," asserts former Cyprus Natural Hydrocarbons Co. (CHNC) CEO Charles Ellinas. "At the same time, the declaration also indicates that Israel is serious about going forward with the agreement." He added, "An Israeli delegation is visiting Cyprus this week to move the negotiations forward, and both sides must take it seriously. There is no point in more meetings ending without any conclusions."
The Ministry of National Infrastructure Energy and Water Resources said in response, "The decision was taken following a thorough professional test, and was sent to the company. The Ministry of National Infrastructure Energy and Water Resources regards development of the natural gas sector as a supreme interest, and is acting without a stop, including through the declaration of gas discoveries, to take the gas out of the ocean depths for the sake of the Israeli economy."
Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2015
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